Question Three: Is country policy frameworks facilitate Renewable Energy

SMEs and attract or influence more RE SMEs’ entry?

This question was created to get a roughly look at the national energy policies if are suitable for enhancing investment in energy sector to assure security of energy supply to a nation. Here below are arguments from survey that show how a favorable policy developments, support programs and minimization of investment and operating costs will create a vigorous investment encouragement for renewable sources in off-grid

locations. With respect to the survey respondents, the study has presented opinions on what and how should energy policy be improved to support existing RE SMEs attract more investor in order to boost rural electrification program, and economy and development activities.

i. Need of Supportive Programs

As explained in previous chapter, investments in energy sector are more capital intensive so any difficulties in attracting capital for energy investments can discourage investors. For investor to get engaged to energy market, they need to be assured with some means of supports and market prosperity. From study survey, supportive investment policies have identified essential tools to attract and encourage investments.

As respondent # 63 outlined that “investments are very attracted from the policy point of view so the government should implementation support on monitoring and evaluation as well as measurable indicators on policy implementation”. The description got support from respondent # 26 who delineated that “high capital needed in investment and there is no clear policy which favor the energy generation and supply is vast challenge to investors”. Also, respondent # 63 indicated that “high investment cost in REs, the government must come out with an innovative financing structure to REs” The elucidation the government must come out with an innovative financing structure to REs is important to be taken into consideration for investments inspirations. Also respondent # 32 declared that “the government is struggling to have a framework to facilitate the renewable energy investment” so it indicate that there is need for means to facilitate RE investments. The information corresponds to respondent # 31 mentioned weaknesses in existing policy claiming that “the current policy framework lacks innovation; it is a straight forward looking into hydro, fuel and now gas”. In the same way, respondent # 09 has identified that “the government's policies in regards to renewable energy don't seem to be moving” that indicate needs for policy amendment.

ii. Openness Prerequisites

Respondent # 14 identified that “the policy is not clear to the community and the leaders take the advantage to import for higher cost for their benefit” Respondent # 38 believed that the corrupted system is barrier to investors efforts towards energy investment by recommending that “transparency in energy policy required - avoiding corruption in the system” Respondent # 42 suggested openness activities by suggesting that “government should further come up with transparent policies &

conduct transparent activities” This is clear that Tanzania needs improvement in policy framework as argued by respondent # 56 that “the country policy is not good, they have to amend the policy first and invite for the investors. Rather than that the performance for rural area electrification will be too shallow” These statements show that for rural electrification successfulness, a well framed policy is very important to be deployed.

iii. Lack of Awareness on Renewable Matters - Information Gap

In Tanzania, it seems renewable energy is not promoted significantly as evidenced by some respondents such as respondent # 09 who stated that “Tanzanians are not aware towards renewable energy and its policy - although they are becoming more aware that it exists”. The study has discovered that majority of Tanzanians are not aware about renewable energy investments, policy and it important to rural development. Example is respondent # 21 who affirmed to be “not aware of any government policy regarding private sector engagement in rural electrification. Their own stated policy is good but I do not expect it to be realized”. The respondent stated that the policy is not expected to be realized because it is not supportive to fully participation of private sector in the energy electricity business. Respondent # 11 acknowledged that “the policy supports renewable energy promotion and encourage private sector participation but the framework is not in place on how this can be implemented”. Meanwhile, respondent # 03 showed dissatisfaction with support schemes as seen in from the statement below

states that “in my opinion, the government support to investors is almost nothing because no applicable or suitable policy framework that attract investors”. The descriptions got back-up from respondent # 38 who specified that “more efforts needed resources available but policy and implementation planning not adhered effectively”.

Based on respondents opinions in the presence or lack of policy, some have said there is no policy, others have said they are not aware of the policy existence and others have said there is policy, but the framework is what is missing. This clearly confirms that policy awareness is very low. The study suggested introduction on strategical programs that will raise awareness on renewable matters and remove the information gap by filling in the gaps about renewable energies.

iv. Subsidies and Stimulus as Essential Tool to Balance Energy Market

Respondent # 57 urged government to amend policy and create means of enabling poor society to manage to buy renewable energy products and services. Respondents pointed out that subsidies and stimulus packages are essential tools to balance energy markets.

For example “the government has put less effort in renewable they must have created a good policy on renewable energies. They have to provide subsides to renewable energies companies and subsides on poor people”. The statement correlate with what discussed in previous chapter that empowering or the prices subsidizing will boost energy market in the rural area of Tanzania. But subsiding prices should be well planned so that investors will be able to operate successful and make profit from the services they provide. At the beginning, the government can set price subsides and investment stimulus but after some time, after their income is grown, the inducements will be removed gradually. This process needs government to dedicate to rural electrification with wisely planned policies and strategies as argued by Nakicenovic, Grubler, & McDonald, (1998: 246) that “to include today’s poor in the energy markets, poverty must be eradicated, and that requires policy action that goes beyond energy policies alone”. The study is confident that availability of energy in rural area of

Tanzania will enhance establishment of macro enterprises that will contribute to combating to eradicating of poverty in the areas.

5.2.4 Question Four: What are the crucial factors that should be adjusted in order to influence and assure more RE SMEs to enter the markets or local companies to collaborate with Global RE SMEs?

The study has identified that for the great benefit to Tanzanian economic and social development, companies’ collaboration in crucial aspect for them to share expertise, for business sustainability and successful performance. Furthermore, collaborations play big role because it helps them to improve companies’ capability and effectiveness. ”No business is an island” (Håkansson & Snehota, 1989). The author highlights that for any business success, the business needs beneficial relationships and complimentary cooperation between companies. Once companies work together in concord manner, there will be no conflict of interest, no unhealthy competition, but there will be a win-win situation with great mutual benefit to both companies. Consequently, each company in collaboration would generate demand for the other that will boost their market and revenue. Well balanced energy market free for everyone to compete is vital to companies’ cooperation. Once again, in this section, poor infrastructure, lack of transparency, leader personal interests, corruption, lack of proper standards and lack of understanding the market fairness play had mentioned as main barriers to for RE SMEs in Tanzania to have a vigorous mutual benefit collaboration network locally and with global RE SMEs in order to improve their capability as well as competitiveness.

Some respondents have claimed that some big companies are entering the country’s energy business under the NGO umbrella to avoid some taxes. For example, respondent

# 09 has claimed that “large NGOs are killing the private sector renewable energy market in Tanzania because they have a lot of money and can afford to operate in ways that a private business cannot afford”. He also stated that at the moment so called

“NGO sector is overwhelming the market. The claim was supported by respondent # 09

with the following explanation; “As a manager of a Tanzanian owned SME which sells a range of solar products and fuel efficient stoves, we are struggling the large western NGOs who are coming into the country and who are offering long term payment plans.

Some of these NGOs begin with millions of US$ and are so far ahead of the Tanzanian owned and operated SME from the very beginning”. The markets dominance from big NGOs or big company is not acceptable situation, the government should also support local investors for local and economic development. Respondent # 09 suggested that

“the market needs to be balanced so that everyone can compete. The Tanzanian bureaucracy is not always easy to work, so sometimes it feels like it would be easier to operate elsewhere in the world”. Also, Sioshansi, (2011: 31) sees the importance of balanced market and requests for its effectiveness in energy policy. He argued that “no government leaves its energy supply solely to the marketplace, and stake holders have strong opinions about both the ends and means of energy policy”. The study has agreed with the advice that Tanzania needs to have a balanced energy market free for everyone to compete. The fairness and equal opportunity to both stakeholders is essential for investment encouragement.

Furthermore, respondent # 53 suggested that “combat corruption, clear example is sugar industry(s) which have inbuilt excess capacity of generating electricity through burning bagasse. These do not need investment but they cannot sell their full excess power due to corruption/ monopoly/ bureaucracy”. With respect to respondent # 53 information, the effect of bureaucracy and corruption can be identified as a clear example of barrier investors are facing and can be taken as clue to find the way for future investments betterment. The study suggests decision makers to create business environment of full disclosure, accessibility to legal information and allow both stakeholders to deal fairly with each other because transparency serve as a base for business successful and mater of survival.

Respondent # 33 suggested that “main challenges for SMEs when delivering services is servicing their credit facilities since their revenue is highly affected by the lone utility which is in bad financial shape”. Respondent # 11 “main Challenge affecting RE SMEs including affordability of consumers due to high cost of generation and low technical support for the new technologies” Respondent # 09 shared that “any energy project

developer on a large scale has to enter agreement with TANESCO in order to supply electricity because it owns infrastructure for transmission and distribution to the end-users. Sometimes costs of generation are higher than what TANESCO is ready to pay.

The information was supported by respondent # 07 who mentioned that the country has

“poor energy infrastructure and unfair pricing of the product” so from there we can see reliability of information provided by respondent # 9 reads that “it is therefore difficult for investor to enter the venture without guaranteed return.

Returns in the energy sector do not always compare well with those of other infrastructure investments. So government policies can make a difference by restructuring subsidies that reduce investment risks consistent with long-term development targets, by encouraging energy prices that reflect real costs, by separating monopoly activities from potentially competitive activities (Nakicenovic, Griibler, &

McDonald, 1998: 101).

However, respondent # 09 acknowledged that “the Renewable Energy Feed in Tariffs have been finalized with the regulator that will allow investors to charge tariffs based on the type of technologies that differ in investment cost” and sees it as good news to investors. This study nevertheless has doubt in low purchasing power of rural societies.

The low purchasing power will still hinder the energy market and suggests well balanced prices setting to be introduced, that will be affordable and would not be below average operating costs. Also this study acknowledges that, improvement of infrastructures is essential because it will play a big role in investors’ attraction.

Nakicenovic, Griibler, & McDonald, (1998: 116) stated that “infrastructure is backbone of the energy system, the impact of technological change can be particularly slow because of the slow rate of capital turnover, so there is the importance of improving and expanding infrastructures for clean grid-dependent energy forms”